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Mercantile Bank Corp. in Grand Rapids has advised the Securities and Exchange Commission via a Form 8-K in late November that its proposed merger with Firstbank Corp. “will not be completed on January 1, 2014, as previously disclosed. The company currently expects the merger will close later in the first quarter of 2014.”

The 8-K was signed by Michael H. Price, president, CEO and chairman of the board of Mercantile.

A protest to the proposed merger was filed with the Federal Reserve System in October by Matthew R. Lee of the Bronx, N.Y., an attorney/activist who heads an online organization called the Inner City Press/Fair Finance Watch.

Lee’s protest, filed under the Community Reinvestment Act, alleges Mercantile does not offer mortgages to African-Americans or Latinos. His formal protest led to the Federal Reserve Board requesting detailed answers from Mercantile to 11 questions.

In addition to providing answers, Mercantile also advised the board that “there is some urgency to the approval of the application,” in terms of additional cost a delay would entail.

An email to the Business Journal from Price states that “since its founding, Mercantile Bank has maintained a solid record of compliance with the Community Reinvestment Act. In its last two Community Reinvestment Act examinations, the bank received an ‘Outstanding’ rating by the FDIC examiners, the highest rating possible.”

In its most recent CRA Performance Evaluation of Mercantile Bank, the FDIC concluded that “Mercantile Bank of Michigan has an outstanding record of helping to meet the credit needs of its assessment area, particularly low- and moderate-income individuals and small businesses in a manner consistent with its resources and capabilities.”

The Price email also states that “specifically, with respect to lending, the FDIC concluded that ‘overall the bank’s performance reflects excellent responsiveness in meeting the assessment area’s credit needs; hence, the bank is rated “Outstanding” under the lending test.’”

Federal Reserve Board spokesperson Susan Stawick told the Business Journal she could not comment on the board’s timetable for resolving the issue but stated the “Federal Reserve staff is performing due diligence regarding the concerns that have been expressed about the merger.”

An attorney who has had many years of involvement in bank mergers told the Business Journal that regulatory objections filed under the Community Reinvestment Act of 1977 “have been going on for decades.” Anyone can file a CRA objection to a merger, without having to be a shareholder in the merging banks, said Joseph B. Hemker, who chairs the Financial Institutions Group practice at the Chicago law firm of Howard & Howard.

“The first objection like that I ever handled was in the late 1980s,” said Hemker, who is a West Michigan native and began his practice representing First of America Bank in Kalamazoo. He now represents about 150 community banks.

Hemker said he has no personal knowledge of the Mercantile merger. He said he has heard of Matthew Lee and believes he has been involved in other CRA protests to bank regulators.

CRA protests are not the only bane of bank mergers. Hemker said third-party suits filed to block mergers and acquisitions previously tended to not include the banking industry, but that has changed. Now, he said, “in almost all (bank) mergers of significant size, there is a lawsuit filed and it’s almost always claimed that the board has breached its fiduciary obligations.”

Most of the law firms that handle those third-party suits tend to be out of New York City, said Hemker, and they tend to settle in return for their attorney fees and a dollar amount small enough that “it’s cost in-effective” to fight “because you know you don’t want to hold up the transaction.”

To have standing in what is called a “derivative” legal action, in which the third-party plaintiff claims to represent shareholders, that plaintiff generally has to be a shareholder.

“But that doesn’t mean they haven’t just gone out and acquired the shares, after they found out” about a pending transaction, added Hemker.

In an interview with the Business Journal, Matthew Lee said he is not a shareholder in either Mercantile or Firstbank, and he stressed his CRA objection is not litigation.

“It’s a public comment process to the Federal Reserve Board, the only way that the Community Reinvestment Act is enforced,” said Lee. “When disparate lending records are highlighted to the Fed, the Fed asks questions of the bank to determine whether to approve or deny the merger application.”

Lee, stressing that he is a social activist, said Hemker is right in his observation that third-party suits are often filed in bank mergers/acquisitions.

“Almost any time a deal is announced, you will see somebody saying on behalf of shareholders that the deal wasn’t priced well enough,” said Lee. “Usually those things are settled very quietly and on a not-very-public basis.”

Lee said he has never done that.

Data on the demographics of many banks’ loan applications and the result is available at the Federal Financial Institutions Examination Council website (ffiec.gov), according to Lee.

Pete Daly is a Grand Rapids Business Journal staff reporter who covers small business, banking and finance, food service and agriculture and government. Email Pete at pdaly at grbj dot com. Follow him on Twitter @PeteDalyGR

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